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The B Word

Cara McLean

With the Autumn Statement published (read more about what it means for Scotland here), our thoughts now turn to darkening days and the imminent arrival of that special time of year… Yes, Draft Budget Time is almost upon us and the sense of anticipation is palpable...

The issue of scrutiny is critical. For months Committees and opposition members have flagged that the publication timetable and related Stage deadlines for the Budget Bill do not allow adequate time for Parliament to assess the plans, but Cabinet Secretary for Finance & Constitution, Derek Mackay, has stood firm that changes will not be made. We even saw a debate in October in which he was accused of "showing contempt for Parliament" with a motion highlighting concern at time available for scrutiny ahead of voting on the plans. His only concession was a commitment to publishing some additional "high level" information.

So now we are in December. The “Autumn” Statement (23rd November) is done and it’s up to the Scottish Government to set out its plans. On Thursday afternoon Mr Mackay will step up to deliver his first Ministerial Statement on the Draft Budget. So will he be Santa or Scrooge? Well, I guess that depends on your angle, but for certain unprotected areas, the forecast isn't looking great.

The University of Strathclyde’s Fraser of Allander Institute (FAI) has warned a slowing economy, austerity and Brexit have combined to present a predicted fall in real terms spending by up to £1.6bn by 2021. Particularly flagged are key spending pledges on university tuition, the doubling of free childcare, increased health spend, an increased police budget (in line with inflation), cutting APD and creating a more generous welfare system. The FAI concludes that re-prioritisation will be required among these, and further warns that unprotected departments could face cuts of up to 17%. Ouch.

As a large part of those unprotected areas, councils are of course expected to bear the brunt of these cuts, with the FAI also warning of a potential real terms cut in local government budgets of 10% between 2017 and 2020. COSLA has called on the Scottish Government to avoid further funding reductions, citing a fall in revenue grant of around £350m last year and saying a similar level of reduction "would have a disastrous impact on both communities and services". The Scottish Local Government Partnership has also suggested the Government is guilty of "piling on more statutory responsibilities without giving councils any additional cash". The Scottish Government, meanwhile, points to an Audit Scotland report on council finances, saying "local government had experienced the same reduction in funding as was imposed on the Scottish Government by Westminster". Council leaders are due to hold a special meeting on Wednesday ahead of the statement, focusing on protecting communities. And we can certainly expect the impact of central finance decisions to feature heavily in the local government election campaigns of the non-SNP parties ahead of polling day in May.

The Scottish Government will no doubt point to Westminster-led austerity and uncertainty related to Brexit as contributing factors to any reductions, but its also worth noting the impact of a collapse in oil price on forecasts for Scottish growth. The main news for this year however, is that for the first time the Scottish budget involves taxation as well as spending. Opposition parties have been vocal in calls for these new powers to be put into practice, with both the LibDems and Labour calling for an extra penny on all tax, and the latter also seeking a new 50p "supertax" for those earning over £150,000. The Greens are also seeking measures to ensure a more progressive policy by "clawing back" what the UK Government is giving to the wealthy. We know the decade-long Council Tax freeze has finally been thawed, with the bills of larger home owners also going up, and those paying will want to see tangible results from these increases. Mr Mackay has already stated the intention to stick to the manifesto pledge of no tax cuts for the highest wage earners and no increase to the basic 20p rate. Conservative opposition to a difference in rate between Scotland and England and those calls for higher taxes from other opposition parties means getting the Budget passed is no foregone conclusion when it comes to tax plans.

Ahead of the announcement, Labour has also called for investment in services, while Greens are seeking consideration of the introduction of a weekly £5 top-up to child benefit as part of measures to address child poverty. The Scottish Conservatives have supported Scottish Government plans to abolish APD on long-haul flights, putting them at odds with the Greens and Labour. Any opposition calls for more cash will no doubt be met with questions as to where finance should come from, so all parties should be prepared to say what they would cut as well as where they would invest.

While it looks likely the threshold for the 40p higher rate income tax band will only increase by inflation, and any plan to cut APD would certainly attract criticism from those concerned with the environment or spending limits, there are a few other things to watch out for. Further detail on the Apprenticeship levy is expected, as is news on Public Sector Pay Policy and a possible enhancement of the Expo Fund for the Edinburgh Festivals (which was another manifesto commitment). Contributions will also cover the breadth of subjects covered by the various Committees, for whom scrutiny of the draft budget has been underway for some weeks.

We will soon find out what Mr Mackay has in store... For whom the next year will be most challenging in terms of cuts, and who are the lucky ones to have benefited from some festive cheer.

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